No transaction charge on UPI for users, small merchants: Nirmala Sitharaman

Referring to the “most discussed and debated point” pertaining to merchant discount rate (MDR) in the proposed umbrella legislation — the Taxation and Other Laws (Amendment) Bill, 2026 — she said the Bill that has been passed by the Lok Sabha, “proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007” and the amendment is “an enabling” provision. MDR is a fee charged to a merchant by a bank for processing electronic or digital payments such as credit cards, debit cards, and UPI. As on date, no MDR is charged on UPI.

Sitharaman said the bill does not impose any tax or transaction charge on UPI users. “So, I’d like to read that again. The enabling provision that we are bringing in today does not impose any tax or transaction charge on UPI uses. It enables the government to specify, through notification, the electronic payment modes that will continue to receive statutory protection against charges,” she said.

“Once the Bill is passed in Parliament, the UPI and services steering committee headed by the National Payment Corporation of India (NPCI), will consider and decide whether any MDR should be introduced, and if so, its scope and structure,” she added. According to NPCI’s website, the UPI & Services Steering Committee currently has 22 members, including State Bank of India, Punjab National Bank, ICICI Bank, HDFC Bank, Google pay, Phone pe, Payments Council of India (PCI) and Indian Banks’ Association (IBA).